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Illustrating Income Inequality, Part 2: Top Earners Have Outpaced Rest Since 1979

January 16, 2014 at 4:31 PM

BY

Chad Stone

In our first post in this series, we showed how after a period of shared prosperity in the early postwar decades, income disparities widened substantially beginning in the 1970s. In this post, we’ll look at how incomes at the top have compared to the rest since the late 1970s.

Income gains since 1979 at the very top have far outpaced those for everyone else. The Congressional Budget Office (CBO) compiles data back to 1979 on the distribution of income and taxes that, as we explain here, have several advantages over other sources, including relatively detailed information about income at the top. CBO finds that since 1979, the top 1 percent’s income has grown explosively, while that of the bottom 99 percent has grown much more slowly. Wealthy households receive much more of their income from capital gains (like selling stocks at a profit), and they can experience larger swings in their income as the stock market rides up and down. The top’s upward march of income hit speed bumps from the dot.com collapse and the 2008 financial crisis, but it appears to be gaining speed once again.

In our next post, we’ll show how the top 1 percent’s share of total income is approaching highs not seen since the 1920s.